Company Loss and Profit Accounting

1. Entries of $ 700 in the discount received account had not been entered in the creditor's ledger. During the year a machine was sold for $ 1000. There was only one entry made and it was a credit in the bank account.
What is the balance on the suspense account?
A. $ 1700 credit
B. $ 1700 debit
C. $ 2700 credit
D. $ 2700 debit

2. A company's policy is to depreciate its equipment by 30% annually using the reducing balance method.
A piece of equipment which was two years old was sold for $ 6000 ant he profit on sale was $ 1590.
What was the cost price of the equipment?
A. $ 7590 B.$9000 C.$9600 D.$ 11025

4. A company has an issued ordinary share capital of 240 000 ordinary shares of $0.50 each.
The company pays a total ordinary share dividend of $9600.
The current market price of an ordinary share is $3.20.
What is the current dividend yield?
A. 1.25% B.2% C. 4% D.8%

5. A business has fixed costs of $ 100 000. It sells a single product for $ 25 per unit, and its contributions to sales ratio is 40 %
What is the break-even point in units?
A. 6667 B. 10 000 C 40000 D 250 000

Solution Preview

Please see attachment - correct answers are in bold, explanations are provided.

Q 1. Entries of $ 700 in the discount received account had not been entered in the creditor's ledger. During the year a machine was sold for $ 1000. There was only one entry made and it was a credit in the bank account.
a) Actual Entry Cr Discount received Dr Creditor
Suspense a/c entry = Dr Suspense a/c $ 700 Cr Discount received $ 700
b) Actual Entry Dr Bank Cr Machine
Suspense a/ entry = = Dr Bank $ 1000 Cr Suspense a/c $ 1000
Hence suspense account balance Cr $300 ( 1000-700)

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BComm, Pune University, INdia

MBA, Cardiff University. UK

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"Thanks Jitendra Lodha! I do have some questions on the solutions so provided.
What then can will do with the $36,00 prepaid for three-years rental lease that was paid on March 1, 20X2 FOR Question 1?
For question 4, What are the effect of the purchases, freight-in and out, purchase discounts, and the inventory amounts in the unadjusted trial balance on the final adjustment you arrived at?
"

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